UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 15, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission file number 0-12343
VICORP Restaurants, Inc.
(Exact name of registrant as specified in its charter)
COLORADO 84-0511072
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 West 48th Avenue Denver, Colorado, 80216
(Address of principal executive offices)
(Zip Code)
(303) 296-2121
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The registrant had 9,513,813 shares of its $.05 par value Common Stock
outstanding as of June 21, 1994.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
VICORP Restaurants, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands)
May 15, October 31,
1994 1993
____________ ____________
(unaudited)
ASSETS
Current assets
Cash $ 5,200 $ 5,288
Receivables 3,182 4,326
Inventories 8,061 10,873
Deferred income taxes 6,700 8,059
Prepaid expenses and other 3,237 3,110
____________ ____________
Total current assets 26,380 31,656
____________ ____________
Property and equipment, net 177,296 177,720
Deferred income taxes 24,582 26,077
Long-term receivables (Note 4) 7,721 7,150
Other assets 11,426 11,428
____________ ____________
Total assets $ 247,405 $ 254,031
============ ============
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands)
May 15, October 31,
1994 1993
____________ ____________
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt and
capitalized lease obligations $ 1,671 $ 1,738
Accounts payable, trade 13,832 20,669
Accrued compensation 6,149 6,229
Accrued taxes 10,466 9,212
Accrued insurance 6,989 6,830
Other accrued expenses 3,778 5,566
____________ ____________
Total current liabilities 42,885 50,244
____________ ____________
Long-term debt (Note 2) 25,323 23,643
Capitalized lease obligations 15,063 16,365
Non-current accrued insurance 8,052 8,433
Other non-current liabilities and credits 6,812 7,028
Commitments and contingencies (Note 4)
Shareholders' equity (Note 3)
Series A Junior Participating Preferred
Stock, $.10 par value, 200,000 shares
authorized, no shares issued -- --
Common stock, $.05 par value, 20,000,000
shares authorized, 10,433,751 shares issued 522 522
Paid-in capital 108,864 108,864
Retained earnings 55,531 49,484
Treasury stock, at cost (817,188 and 522,188
common shares) (15,647) (10,552)
____________ ____________
Total shareholders' equity 149,270 148,318
____________ ____________
Total liabilities and shareholders' equity $ 247,405 $ 254,031
============ ============
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Twelve Twenty-eight
weeks ended weeks ended
__________________________ __________________________
May 15, May 9, May 15, May 9,
1994 1993 1994 1993
____________ ____________ ____________ ____________
(unaudited)
<S> <C> <C> <C> <C>
Revenues
Restaurant operations $ 96,280 $ 98,980 $ 226,239 $ 228,517
Franchise operations 702 601 1,436 1,424
____________ ____________ ____________ ____________
96,982 99,581 227,675 229,941
____________ ____________ ____________ ____________
Costs and expenses
Restaurant operations
Food 28,240 29,210 67,418 67,374
Labor 29,763 29,216 69,722 67,696
Other operating 28,259 27,478 65,519 63,187
General and administrative 6,025 5,318 13,498 13,368
Interest 919 928 2,123 2,057
Other (income) expense, net (107) (216) (279) (358)
____________ ____________ ____________ ____________
93,099 91,934 218,001 213,324
____________ ____________ ____________ ____________
Income before income taxes 3,883 7,647 9,674 16,617
Provision for income taxes 1,456 3,021 3,627 6,564
____________ ____________ ____________ ____________
Net income $ 2,427 $ 4,626 $ 6,047 $ 10,053
============ ============ ============ ============
Earnings per common and
dilutive common
equivalent share $ .25 $ .45 $ .61 $ .97
============ ============ ============ ============
Weighted average common
shares and dilutive
common share equivalents 9,833 10,376 9,951 10,393
============ ============ ============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
VICORP Restaurants, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Twenty-eight weeks ended
____________________________
May 15, May 9,
1994 1993
____________ ____________
(unaudited)
OPERATIONS
Net income $ 6,047 $ 10,053
Reconcilation to cash provided by operations
Depreciation and amortization 13,877 12,367
Deferred income tax provision 2,854 3,781
Loss on disposition of assets 942 861
Other, net (153) 1,550
____________ ____________
23,567 28,612
Change in assets and liabilities
Trade receivables 835 688
Inventories 2,812 (129)
Accounts payable, trade (6,837) (4,465)
Other current assets and liabilities (955) (1,446)
Non-current accrued insurance (381) 1,217
____________ ____________
Cash provided by operations 19,041 24,477
____________ ____________
INVESTING ACTIVITIES
Purchase of property and equipment (14,678) (20,240)
Purchase of other assets (409) (412)
Disposition of property 315 (120)
Additions to long-term receivables (1,088) --
Collection of non-trade receivables 839 337
____________ ____________
Cash used for investing activities (15,021) (20,435)
____________ ____________
FINANCING ACTIVITIES
Issuance of debt 7,750 4,250
Payment of debt and capitalized lease
obligations (6,956) (4,856)
Purchase of treasury shares (5,095) (2,529)
Other, net 193 219
____________ ____________
Cash used for financing activities (4,108) (2,916)
____________ ____________
Increase (decrease) in cash (88) 1,126
Cash at beginning of period 5,288 4,840
____________ ____________
Cash at end of period $ 5,200 $ 5,966
============ ============
SUPPLEMENTAL INFORMATION
Cash paid during the period for
Interest (net of amount capitalized) $ 2,123 $ 2,062
Income taxes 1,098 1,304
The accompanying notes are an integral part of the financial statements.
VICORP Restaurants, Inc.
NOTES TO FINANCIAL STATEMENTS (unaudited)
_________________________________________
1. The consolidated financial statements should be read in conjunction with
the annual report to shareholders for the year ended October 31, 1993.
The unaudited financial statements for the twelve and twenty-eight weeks
ended May 15, 1994 and May 9, 1993 contain all adjustments which, in the
opinion of management, were necessary for a fair statement of the results
for the interim periods presented. All of the adjustments included were
of a normal and recurring nature.
2. As of May 15, 1994, the Company had $25,000,000 of borrowings and
$13,035,000 of letters of credit placed under its bank credit facility.
Incremental net borrowings of $1,750,000 were incurred during the first
half of 1994.
3. During the first two quarters of 1994, the Company purchased 295,000
shares of its common stock for $5,095,000 pursuant to authorization
from its Board of Directors. Subsequent to the end of the second quarter,
an additional 107,600 shares of the Company's common stock was purchased
for $1,529,000. At June 21, 1994, authorization to purchase an additional
47,400 common shares was available.
4. The Company's insurance carriers are disputing the extent of coverage in
regard to a $6,500,000 lawsuit settlement made in June of 1992. The
Company has undertaken legal action against the carriers to recover actual
and exemplary damages, costs and attorneys' fees.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
_____________________
The Company's quarterly financial information is subject to seasonal
fluctuation. Also, the quarterly periods ended February 20, 1994
and February 14, 1993 were comprised of sixteen weeks each, while the remainder
of the Company's quarterly periods are comprised of twelve weeks each, except
for the fourth quarter of 1993 which was thirteen weeks. As a result, the
financial information for the periods presented is not indicative of results
that may be achieved on an annual basis.
RESTAURANT OPERATIONS
The following table sets forth certain operating information for the Company's
primary restaurant groups. It does not include the results of operations of
certain other restaurants not within the primary groups.
<TABLE>
<CAPTION>
Twelve weeks ended Twenty-eight weeks ended
__________________________________ __________________________________
May 15, May 9, May 15, May 9,
1994 1993 1994 1993
____________ ____________ ____________ ____________
<S> <C> <C> <C> <C>
BAKERS SQUARE
Midwest
Restaurant sales $ 37,763,000 $ 38,395,000 $ 88,360,000 $ 86,814,000
Operating margin 13.0% 17.5% 13.2% 17.7%
California
Restaurant sales $ 23,259,000 $ 25,532,000 $ 56,428,000 $ 60,409,000
Operating margin 5.4% 7.6% 5.8% 9.0%
VILLAGE INN
West
Restaurant sales $ 28,104,000 $ 27,953,000 $ 64,908,000 $ 65,029,000
Operating margin 13.3% 13.9% 12.7% 12.9%
Florida
Restaurant sales $ 6,428,000 $ 6,318,000 $ 15,012,000 $ 14,461,000
Operating margin 2.8% 9.1% 4.0% 7.8%
COMBINED
Restaurant sales $ 95,554,000 $ 98,198,000 $224,708,000 $226,713,000
Operating margin 10.5% 13.4% 10.6% 13.4%
</TABLE>
Overall restaurant sales decreased 2.7% for the second quarter and .9% for the
fiscal first half of 1994 in comparison to the same prior year periods.
The decreases occurred despite the net addition of eight restaurants since the
second quarter of 1993 and the full period inclusion in 1994 of nine restaurants
opened in the fiscal first half of 1993. Comparable restaurant sales decreased
6.5% and 6.0% in the quarter and fiscal first half, respectively, with the
decreases primarily concentrated in the Bakers Square groups. Severe cold
weather in the Midwest and the earthquake and rains in California in 1994's
first half affected the sales comparison. Differences in the timing and weights
of media advertising were partially responsible for the weaker second quarter
sales.
The Company has made certain senior management changes and is instituting
certain Bakers Square repositioning programs it believes will be instrumental
in reversing the trend of decreased customer counts, although the tangible
benefits of the programs may take some time to develop.
Restaurant operating income decreased both in total and as a percentage of
sales. The effect of lower comparable sales on labor and fixed costs was
principally responsible for the lower restaurant operating income. Partially
offsetting this was incremental profits from operating new restaurants and
reduced insurance expense.
OTHER REVENUES AND EXPENSE
General and administrative expense increased in the second quarter in comparison
to last year due primarily to insurance litigation related costs and certain
reversals in 1993 of previously provided incentive expenses due to deteriorating
performance against expectations.
The effective income tax rate used for financial reporting purposes was 37.5% in
1994 compared with 39.5% for the same periods last year. The 1994 rate was
lower due primarily to the FICA tipped income tax credit which took effect
January 1, 1994. This credit more than offset the effect of an increase in the
top federal rate from 34% to 35% resulting from the Omnibus Budget
Reconciliation Act of 1993 enacted in August of 1993.
LIQUIDITY AND CAPITAL RESOURCES
As a result of the decrease in net income and changes in working capital
elements resulting from the timing and amount of certain short-term obligations,
cash provided by operations decreased 22.2% from 1993. Absent changes in
working capital elements, operating cash flow decreased 17.6% from 1993 levels.
As of May 15, 1994, $25,000,000 was outstanding under the Company's bank credit
facility and approximately $37,000,000 was available for additional direct
advances, subject to limitations on combined direct advances and letters of
credit. Incremental net borrowings of $1,750,000 under this line were incurred
during the first half of 1994.
Through the first two quarters of 1994, the Company purchased 295,000 shares of
its common stock for $5,095,000 under authorization granted by its Board.
Subsequent to the end of the second quarter, an additional 107,600 shares of the
Company's common stock was purchased for $1,529,000. Authorization for the
purchase of an additional 47,400 shares remains available. Future purchases with
respect to this authorization may be made from time to time in the open market
or through privately negotiated transactions and will be dependent upon various
business and financial considerations.
Capital expenditures approximating $15,000,000 are expected during the remainder
of the fiscal year. Cash provided by operations and the unused portion of the
Company's bank credit facility are expected to be adequate to fund these
expenditures and any cash outlays for the purchase of the Company's common stock
as authorized by the Board.
PART II
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
On April 12, 1994, the Registrant held its Annual Meeting of Shareholders.
At that meeting, two proposals were submitted to the shareholders for approval,
one related to the election of directors and the other concerned ratification
of the appointment of the Company's independent auditors for VICORP's 1994
fiscal year.
Each of the nominees for directors were elected based upon the following
vote:
Director For Against Abstain Broker Non-Votes
____________________ ____________ __________ ___________ _________________
Carole Lewis Anderson 7,591,735 44,933 -- --
Robert S. Benson 7,548,465 88,203 -- --
Bruce B. Brundage 7,591,167 45,501 -- --
Charles R. Frederickson 7,548,465 88,203 -- --
John C. Hoyt 7,590,966 45,702 -- --
Robert C. Marto 7,591,735 44,933 -- --
Dudley C. Mecum 7,591,735 44,933 -- --
Dennis B. Robertson 7,591,735 44,933 -- --
Arthur Zankel 7,548,466 88,202 -- --
The selection of Arthur Andersen & Co. to serve as the Company's independent
accountants for fiscal 1994 was ratified. The vote was 7,508,470 for; 116,896
against; 9,522 abstained; and 1,780,000 broker non-votes.
Item 6: EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(15) Letter regarding unaudited interim financial information
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of VICORP Restaurants, Inc.
We have reviewed the accompanying condensed consolidated balance sheet
of VICORP Restaurants, Inc. (a Colorado corporation) and subsidiary
as of May 15, 1994, and the related condensed consolidated statements of
operations for the twelve and twenty-eight week periods ended May 15, 1994
and May 9, 1993, and the related condensed consolidated statements of cash
flows for the twenty-eight week periods ended May 15, 1994 and May 9, 1993.
These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of VICORP Restaurants, Inc. and
subsidiary as of October 31, 1993 (not presented herein) and, in our report
dated December 9, 1993, we expressed an unqualified opinion on that statement.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of October 31, 1993, is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.
ARTHUR ANDERSEN & CO
Denver, Colorado,
June 7, 1994
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VICORP Restaurants, Inc.
________________________
(Registrant)
June 22, 1994
Robert S. Benson, President
June 22, 1994
Dennis L. Kuper, Executive Vice
President of Finance
EXHIBIT 15
June 22, 1994
VICORP Restaurants, Inc. :
We are aware that VICORP Restaurants, Inc. has incorporated by reference
into the Company's previously filed Registration Statements File No.
33-26650, 33-32608, 33-34447, 33-48205, and 33-49166, its Form 10-Q for the
quarter ended May 15, 1994, which includes our report dated June 7, 1994,
covering the unaudited interim financial information contained therein.
Pursuant to Regulation C of the Securities Act of 1933, that report is not
considered a part of the registration statement prepared or certified by
our firm or a report prepared or certified by our firm within the meaning
of Sections 7 and 11 of the Act.
Very truly yours,
ARTHUR ANDERSEN & CO
